PRIOR PRINTER'S NOS. 3545, 3761 PRINTER'S NO. 3838
No. 2400 Session of 2008
INTRODUCED BY LENTZ, BELFANTI, GERBER, DiGIROLAMO, W. KELLER,
McCALL, EACHUS, CAPPELLI, MUSTIO, GINGRICH, ADOLPH, BARRAR,
BIANCUCCI, BISHOP, BLACKWELL, BRENNAN, CALTAGIRONE, CARROLL,
CIVERA, COHEN, DeLUCA, DePASQUALE, GEORGE, GERGELY, GODSHALL,
GOODMAN, GRUCELA, HARHAI, HARKINS, HORNAMAN, JOSEPHS, KENNEY,
KOTIK, KULA, MANDERINO, MANN, McGEEHAN, McILVAINE SMITH,
MELIO, MYERS, M. O'BRIEN, PASHINSKI, PETRONE, RAYMOND,
READSHAW, ROEBUCK, SABATINA, SHIMKUS, SIPTROTH, K. SMITH,
M. SMITH, SOLOBAY, STAIRS, SURRA, J. TAYLOR, R. TAYLOR,
WAGNER, WALKO, WATERS, J. WHITE AND PERZEL, APRIL 3, 2008
AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES,
JUNE 3, 2008
AN ACT
1 Providing for the criteria for independent contractors in the
2 construction industry; and imposing penalties.
3 The General Assembly of the Commonwealth of Pennsylvania
4 hereby enacts as follows:
5 Section 1. Short title.
6 This act shall be known and may be cited as the Construction
7 Industry Independent Contractor Act.
8 Section 2. Legislative intent.
9 The General Assembly finds that increasingly employers in the
10 construction industry are improperly classifying employees as
11 independent contractors or paying unreported compensation in
12 order to evade compliance with Federal and State laws. These
13 actions deprive these workers of Social Security benefits and
1 other benefits, INCLUDING OVERTIME PAY, while reducing the <--
2 employers' Federal and State tax withholdings and related
3 obligations. These practices put employers that bear higher
4 business costs for complying with applicable law at a
5 competitive disadvantage with those who do not follow the law.
6 In order to restrict and eliminate these actions the General
7 Assembly sees the need to enact legislation to specifically
8 address these issues.
9 Section 3. Definitions.
10 The following words and phrases when used in this act shall
11 have the meanings given to them in this section unless the
12 context clearly indicates otherwise:
13 "Construction." Construction, reconstruction, demolition,
14 alteration, modification, erection, custom fabrication, repair
15 work or maintenance work done on any REAL property or premises <--
16 under contract, whether or not the work is for a public body and
17 paid for from public funds.
18 "Department." The Department of Labor and Industry of the
19 Commonwealth.
20 "Employer." The term includes any individual, partnership,
21 association, joint stock company, corporation, business trust or
22 any other person or groups of persons acting directly or
23 indirectly in the interest of an employer in relation to an
24 employee and who is engaging in or performing services in the
25 commercial or residential building construction industry for
26 remuneration.
27 "MINIMUM WAGE ACT." THE ACT OF JANUARY 17, 1968 (P.L.11, <--
28 NO.5), KNOWN AS THE MINIMUM WAGE ACT OF 1968.
29 "Secretary." The Secretary of Labor and Industry of the
30 Commonwealth or the secretary's authorized representative.
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1 "WORKERS' COMPENSATION ACT." THE ACT OF JUNE 2, 1915 <--
2 (P.L.736, NO.338), KNOWN AS THE WORKERS' COMPENSATION ACT.
3 "UNEMPLOYMENT COMPENSATION LAW." THE ACT OF DECEMBER 5, 1936
4 (2ND SP.SESS., 1937 P.L.2897, NO.1), KNOWN AS THE UNEMPLOYMENT
5 COMPENSATION LAW.
6 "WAGE PAYMENT AND COLLECTION LAW." THE ACT OF JULY 14, 1961
7 (P.L.637, NO.329), KNOWN AS THE WAGE PAYMENT AND COLLECTION LAW.
8 Section 4. Certain services deemed employment and exceptions.
9 (a) General rule.--For purposes of this act, THE MINIMUM <--
10 WAGE ACT, THE WAGE PAYMENT AND COLLECTION LAW, THE UNEMPLOYMENT
11 COMPENSATION LAW AND THE WORKERS' COMPENSATION ACT, an
12 individual engaging in or performing services in the commercial
13 or residential building construction industry for remuneration
14 is presumed to be an employee unless:
15 (1) the individual can demonstrate by substantial <--
16 credible evidence that the individual is HAS BEEN AND WILL <--
17 CONTINUE TO BE free from control or direction over
18 performance of such services both under the contract of
19 service and in fact; and
20 (2) as to such services, the individual is customarily
21 engaged in an independently established trade, occupation,
22 profession or business.
23 (b) Independent contractor criteria.--An individual engaging
24 in or performing services in the commercial or residential
25 building construction industry for remuneration shall be deemed
26 an independent contractor if the individual can demonstrate, by
27 credible evidence, that the individual meets all of the
28 following criteria:
29 (1) Maintains a separate business location that is
30 separate from the location of the person or entity for whom
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1 services are being performed, with the individual's own
2 office, and operates with owned or leased equipment and other
3 facilities. For purposes of this paragraph, an office may be
4 maintained in the individual's residence if the individual is
5 licensed to perform the specific kind and quality of work
6 required by the contracts specified in this subsection by all
7 State and local licensing authorities.
8 (2) Operates under contracts which are in writing and
9 which contracts articulate plainly the precise terms of
10 payment for work performed, the scope of work to be performed
11 and a specific prohibition on the retention by the
12 independent contractor of any other independent contractor to
13 perform any part of the work described in the contract.
14 (3) Includes INCOME AND LOSSES FROM services rendered on <--
15 a Federal income tax schedule as an independent business or
16 profession.
17 (4) Incurs the main expenses related to the work.
18 (5) Is responsible for the satisfactory completion of
19 the work and is liable for a failure to complete the work.
20 (6) Realizes a profit or loss under contracts to perform
21 work.
22 (7) The success or failure of the individual's business
23 depends on the relationship of business receipts to
24 expenditures.
25 (8) Has through ownership, or a written and executed
26 leasing arrangement WITH A PERSON OTHER THAN THE EMPLOYER, <--
27 the tools, equipment and other assets necessary to perform
28 the services.
29 (9) Makes services available to other businesses,
30 governmental agencies in this Commonwealth or to the general
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1 public through business advertising, solicitation or other
2 marketing efforts reasonably calculated to obtain new
3 contracts to provide similar services.
4 (10) Has continuing or recurring business liabilities or
5 obligations.
6 (11) Performs the services through a business in which
7 the individual has a principal proprietary interest.
8 (12) Is a United States citizen or is authorized under
9 Federal law to work in the United States, as defined under
10 section 274A of the Immigration and Nationality Act (66 Stat.
11 163, 8 U.S.C. § 1324a).
12 (c) Factor not to be considered.--The failure to withhold
13 Federal or State income taxes or pay unemployment compensation
14 taxes with respect to an individual's remuneration shall not be
15 considered in determining whether the individual is an
16 independent contractor for purposes of the act of June 2, 1915 <--
17 (P.L.736, No.338), known as the Workers' Compensation Act, or
18 the act of December 5, 1936 (2nd Sp.Sess., 1937 P.L.2897, No.1),
19 known as the Unemployment Compensation Law. UNEMPLOYMENT <--
20 COMPENSATION LAW OR THE WORKERS' COMPENSATION ACT.
21 (d) Construction.--For purposes of this section, each
22 employment relationship shall be considered separately.
23 Section 5. Improper classification of employees.
24 (a) Violation.--An employer, or an officer or agent of the <--
25 employer, that fails to properly classify an individual as an
26 employee in accordance with section 4 shall be subject to the
27 penalties, remedies or actions contained in this act.
28 (A) OFFENSE DEFINED.--AN EMPLOYER, OR OFFICER OR AGENT OF AN <--
29 EMPLOYER, COMMITS A VIOLATION OF THIS ACT IF THE EMPLOYER,
30 OFFICER OR AGENT FAILS TO PROPERLY CLASSIFY THE INDIVIDUAL AS AN
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1 EMPLOYEE WITH THE INTENT OF EVADING THE REQUIREMENTS OF THE
2 MINIMUM WAGE ACT, THE WAGE PAYMENT AND COLLECTION LAW, THE
3 UNEMPLOYMENT COMPENSATION LAW OR THE WORKERS' COMPENSATION ACT
4 AND SHALL BE SUBJECT TO THE PENALTIES, REMEDIES OR ACTIONS
5 CONTAINED IN THIS ACT.
6 (b) Enforcement.--When the secretary finds that an employer
7 has violated a provision of this act, the secretary may refer
8 the matter to the Office of Attorney General for investigation
9 and prosecution. Nothing in this act shall be deemed to limit
10 the authority of the Attorney General to investigate and
11 prosecute violations of this act.
12 (c) Conspiracy by other parties.--A party that does not meet
13 the definition of "employer" in section 3, but which contracts
14 with an employer knowing the employer intends to misclassify
15 employees in violation of this act shall be subject to the same
16 penalties, remedies or other actions as the employer found to be
17 in violation of this act.
18 Section 6. Criminal penalties.
19 (a) Knowing violation.--An employer, or an officer or agent <--
20 (A) KNOWING VIOLATION.-- <--
21 (1) AN EMPLOYER, OR OFFICER OR AGENT of the employer,
22 that knowingly violates section 5(a) commits a felony of the
23 third degree and shall, upon conviction:
24 (1) be sentenced to pay a fine of not more than $15,000 <--
25 or imprisonment for not more than three and one-half years,
26 or both, for a first offense;
27 (2) be sentenced to pay a fine of not more than $30,000
28 or imprisonment for not more than seven years, or both, for a
29 subsequent offense; and
30 (3) may be subject to a stop-work order, as determined
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1 by the secretary pursuant to section 8.
2 (b) Unintentional violation.--An employer, or an officer or
3 agent of the employer, that unintentionally violates section
4 5(a) commits a misdemeanor of the third degree and shall, upon
5 conviction, be sentenced to pay a fine of not more than $2,500
6 for a first offense. A prior occurrence shall be deemed to be
7 clear and convincing evidence of intention with respect to any
8 subsequent violation.
9 (I) BE SENTENCED TO PAY A FINE OF NOT MORE THAN <--
10 $15,000 OR IMPRISONMENT FOR NOT MORE THAN THREE AND ONE-
11 HALF YEARS, OR BOTH, FOR A FIRST OFFENSE; AND
12 (II) BE SENTENCED TO PAY A FINE OF NOT MORE THAN
13 $30,000 OR IMPRISONMENT FOR NOT MORE THAN SEVEN YEARS, OR
14 BOTH, FOR A SUBSEQUENT OFFENSE.
15 (2) AN EMPLOYER, OR OFFICER OR AGENT OF THE EMPLOYER,
16 THAT, AFTER BEING SENTENCED UNDER PARAGRAPH (1)(I), KNOWINGLY
17 VIOLATES SECTION 5(A) MAY BE SUBJECT TO A STOP-WORK ORDER, AS
18 DETERMINED BY THE SECRETARY PURSUANT TO SECTION 8.
19 (B) SUMMARY OFFENSE.--AN EMPLOYER, OR OFFICER OR AGENT OF
20 THE EMPLOYER, THAT NEGLIGENTLY FAILS TO PROPERLY CLASSIFY AN
21 INDIVIDUAL AS AN EMPLOYEE UNDER SECTION 5(A) COMMITS A SUMMARY
22 OFFENSE AND SHALL, UPON CONVICTION, BE SENTENCED TO PAY A FINE
23 OF NOT MORE THAN $1,000. EVIDENCE OF A PRIOR CONVICTION UNDER
24 THIS SUBSECTION SHALL BE ADMISSIBLE AS EVIDENCE OF KNOWLEDGE
25 UNDER SUBSECTION (A).
26 Section 7. Civil actions and remedies.
27 (a) Debarment.--If the secretary determines, after notice <--
28 and hearing, that an employer, or an officer or agent of the
29 employer, has knowingly failed to properly classify an
30 individual as an employee or failed to pay required benefits or
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1 other contributions as required in section 5, or upon the
2 conviction for a violation of this act, the
3 (A) DEBARMENT AND ORDER TO SHOW CAUSE.--IF THE SECRETARY <--
4 RECEIVES INFORMATION INDICATING THAT AN EMPLOYER, OR OFFICER OR
5 AGENT OF THE EMPLOYER, HAS KNOWINGLY AND INTENTIONALLY VIOLATED
6 THIS ACT, OR HAS BEEN CONVICTED OF A VIOLATION OF THIS ACT, THE
7 SECRETARY SHALL ISSUE AN ORDER TO SHOW CAUSE WHY THE INDIVIDUAL
8 SHOULD NOT BE FOUND IN VIOLATION OF THIS ACT AND SUBJECT TO
9 DEBARMENT. AN INDIVIDUAL SERVED WITH AN ORDER TO SHOW CAUSE
10 SHALL HAVE A PERIOD OF 20 DAYS FROM THE DATE THE ORDER IS SERVED
11 TO FILE AN ANSWER IN WRITING. IF THE INDIVIDUAL FAILS TO FILE A
12 TIMELY AND ADEQUATE ANSWER TO THE ORDER TO SHOW CAUSE, THE
13 SECRETARY SHALL ISSUE AN IMMEDIATE DEBARMENT OR IMMEDIATELY
14 ASSESS PENALTIES AS PROVIDED IN THIS SECTION, OR BOTH. THE
15 secretary shall notify all public bodies in this Commonwealth of
16 the name of the employer, and no contract shall be awarded to
17 the employer or to any firm, corporation or partnership in which
18 the employer has an interest until a period of up to three
19 years, as determined by the secretary, has elapsed from the date
20 of the notice.
21 (b) Administrative penalties.--As an alternative to or in
22 addition to any other sanctions provided by law for a violation
23 of this act, when the secretary finds that an employer has
24 violated this act, the secretary is authorized to assess and
25 collect administrative penalties up to a maximum of $2,500 for
26 the first violation and up to a maximum of $5,000 for each
27 subsequent violation. When determining the amount of the penalty
28 imposed because of a violation, the secretary shall consider
29 factors which include the history of previous violations by the
30 employer, the seriousness of the violation, the good faith of
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1 the employer and the size of the employer's business. Each
2 employee misclassified by the employer shall constitute a
3 separate offense.
4 (c) Actions by employees.--An individual who has not been
5 properly classified as an employee may bring a civil action for
6 damages against the employer for knowingly AND INTENTIONALLY <--
7 failing to properly classify the employee. An individual's
8 representative, including a labor organization, may bring the
9 action on behalf of the individual or as a class action. The
10 court may award attorney fees and other costs of the action in
11 addition to damages to an individual or class of individuals who
12 have not been properly classified as employees in violation of
13 section 5(a).
14 Section 8. Stop-work orders.
15 (a) Issuance of order.--If the secretary determines, after
16 notice and hearing, that an employer, or officer or agent of the
17 employer, has knowingly AND INTENTIONALLY failed to properly <--
18 classify an individual as an employee under section 5, the
19 secretary may issue a stop-work order requiring the cessation of
20 all business operations within 72 hours of the determination.
21 The order shall take effect when served upon the employer or,
22 for a particular employer worksite, when served at the worksite.
23 The order shall remain in effect until the secretary issues an
24 order releasing the stop-work order or upon finding that the
25 employer has properly classified the individual as an employee.
26 The employer shall file with the department periodic reports for
27 a probationary period that shall not exceed two years that
28 demonstrate the employer's continued compliance with this
29 section. The department shall promulgate rules and regulations
30 to determine filing times and report requirements.
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1 (b) Applicability of orders.--Stop-work orders under
2 subsection (a) and penalties under subsection (c) shall be in
3 effect against any successor corporation or business entity that
4 has one or more of the same principals or officers as the
5 employer against whom the stop-work order was issued and which
6 is engaged in the same or equivalent trade or activity.
7 (c) Penalty.--The secretary shall assess a penalty of $1,000
8 per day against an employer for each day that the employer
9 conducts business operations that are in violation of a stop-
10 work order issued under this section.
11 Section 9. Procedure.
12 (a) Hearings.--Actions taken under sections 7 and 8 are
13 subject to the right of notice and adjudication and the right of
14 appeal in accordance with the provisions of 2 Pa.C.S. (relating
15 to administrative law and procedure).
16 (b) Subpoena powers.--The department has the power to
17 subpoena witnesses, administer oaths, examine witnesses and take
18 testimony or compel the production of documents. Upon
19 application of an attorney for the Commonwealth, the department
20 may issue a subpoena to compel the production of the documents,
21 computer records and information relating to compliance with the
22 act.
23 Section 10. Commonwealth Court.
24 The secretary may seek enforcement of any order or subpoena
25 in the Commonwealth Court.
26 Section 11. Certain agreement prohibited.
27 No person shall require or request that an individual enter
28 into an agreement or sign a document which results in the
29 misclassification of the individual as an independent contractor
30 or otherwise does not accurately reflect the relationship with
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1 the employer.
2 Section 12. Retaliation for action prohibited.
3 It shall be unlawful for an employer or any other party to
4 discriminate in any manner or take adverse action against any
5 person in retaliation for exercising rights protected under this
6 act. Rights protected under this act include, but are not
7 limited to, the right to file a complaint or inform any person
8 about an employer's noncompliance with this act and the right to
9 inform any person of the person's potential rights and to assist
10 the person in asserting those rights. Any person who in good
11 faith alleges noncompliance with this act shall be afforded the
12 rights provided by this act, notwithstanding the person's
13 failure to prevail on the merits. Taking adverse action against
14 a person within 90 days of the person's exercise of rights
15 protected under this act shall raise a rebuttable presumption of
16 having done so in retaliation for the exercise of those rights.
17 Section 13. Use of penalty funds.
18 Any assessments and penalties collected pursuant to this act
19 shall be applied toward implementation, enforcement and
20 administration costs incurred by the department under this act.
21 However, the secretary may transfer an agreed-to amount of
22 moneys collected to the Attorney General to assist in the
23 enforcement of this act.
24 Section 14. Rules and regulations.
25 The department may promulgate rules and regulations necessary
26 to implement AND ADMINISTER this act. <--
27 Section 15. Annual report required.
28 The department shall submit an annual report to the General
29 Assembly by March 1 of the year following the first full year in
30 which this act is in effect, and each year thereafter,
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1 detailing, to the maximum extent possible, data on the previous
2 calendar year's administration and enforcement of this act. The
3 department may include any relevant facts and statistics that it
4 believes necessary into the content of the report.
5 SECTION 16. APPLICABILITY. <--
6 THIS ACT SHALL NOT BE CONSTRUED TO BRING AN INDIVIDUAL WITHIN
7 THE SCOPE OF THE UNEMPLOYMENT COMPENSATION LAW OR THE WORKERS'
8 COMPENSATION ACT IF THE INDIVIDUAL IS EXCLUDED FROM THE SCOPE OF
9 THE APPROPRIATE STATUTE.
10 SECTION 17. SEVERABILITY.
11 THE PROVISIONS OF THIS ACT ARE SEVERABLE. IF ANY PROVISION OF
12 THIS ACT OR ITS APPLICATION TO ANY INDIVIDUAL OR CIRCUMSTANCE IS
13 HELD INVALID, THE INVALIDITY SHALL NOT AFFECT OTHER PROVISIONS
14 OR APPLICATIONS OF THIS ACT WHICH CAN BE GIVEN EFFECT WITHOUT
15 THE INVALID PROVISION OR APPLICATION.
16 SECTION 18. CONSTRUCTION OF LAW.
17 NOTHING CONTAINED IN THIS ACT SHALL BE CONSTRUED TO IMPAIR OR
18 AFFECT IN ANY MANNER THE ABILITY OF THE DEPARTMENT TO CARRY OUT
19 THE POWERS AND DUTIES PRESCRIBED BY THE LAWS OF THIS
20 COMMONWEALTH OR TO ADOPT MEASURES TO IMPROVE THE ENFORCEMENT OF
21 OTHER LAWS OF THIS COMMONWEALTH.
22 Section 16 19. Effective date. <--
23 This act shall take effect January 1, 2009, or in 90 days,
24 whichever is later.
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